NatWest has admitted that operational failures, including weaknesses in automated monitoring systems, meant that it failed to prevent the money laundering of £400m.
The bank pleaded guilty at Westminster magistrates court to failing to comply with anti-money laundering regulations between 2012 and 2016.
Financial Conduct Authority (FCA) regulations mean finance firms must have adequate anti-money laundering systems and controls in place.
Anti-money laundering software automates the monitoring of suspicious activity being carried out on a bank’s network, but NatWest failed to identify and stop money laundering by a jewellery business in Bradford, which included deposits of up to £1.8m a day.
NatWest CEO Alison Rose said: “We deeply regret that NatWest failed to adequately monitor, and therefore prevent, money laundering by one of our customers between 2012 and 2016. In the years since this case, we have invested significant resources and continue to enhance our efforts to effectively combat financial crime.”
Rose said the bank has invested hundreds of millions of pounds since, improving transaction monitoring systems and automating systems that screen customers. A further £1bn has been allocated to financial crime controls over the next five years.
The case has now been referred to Southwark Crown Court for sentencing. This is the first criminal prosecution by the FCA under the Money Laundering Regulation 2007.
Money laundering, and its links to organised crime, is a serious global problem that banks find themselves at the centre of. According to the UN, up to $2tn is moved illegally each year, with criminals using banks to hide money. In the UK, the National Crime Agency estimates that money laundering costs the country’s economy £24bn each year.
Banks that have fallen short of complying with anti-money laundering rules have been heavily fined by regulators.
According to research published in February 2021 by business-to-business information services company Kyckr, 28 financial institutions across the globe were fined for anti-money laundering-related violations in 2020, equating to about £2.6bn.
German neo bank N26 was recently fined €4.25m by the German financial services regulator for weak anti-money laundering practices related to the late filing of about 50 suspicious activity reports in 2019 and 2020.
But there have been some much higher fines. Swedbank was fined €347m by regulators in Sweden and Estonia in 2020 for breaching money laundering laws, Dutch bank ING was fined €775m in 2018 for failing to prevent the laundering of hundreds of millions of euros between 2010 and 2016, and in 2017, Citigroup agreed to pay almost $100m and admitted criminal violations as it settled an investigation into breaches of anti-money laundering rules involving money transfers between the US and Mexico.
In the light of the heavy financial costs of non-compliance with anti-money laundering regulations, banks are investing in technology to automate prevention. These include technologies that use artificial intelligence and machine learning to spot suspicious activity within huge datasets.
